SPEECHES & TESTIMONY

Good morning. I would like to start by thanking Chairman Schapiro for all of her efforts on behalf of the investing public as well as the staff of the SEC for hosting this first meeting of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues.

I also want to recognize and thank my fellow CFTC Commissioners, Mike Dunn, Jill Sommers, Bart Chilton and Scott O’Malia. I thank them for their support in establishing this joint committee and for all of their work on behalf of the American public. I know that each of us looks forward to receiving the advice of this expert panel.

During the Presidential transition, when Chairman Schapiro and I first discussed possibly setting up a joint advisory committee, little did we think it would take a year and a half, a joint harmonization report, an act of Congress and a 1,000-point drop in the Dow before getting it done. I am so pleased to have our first meeting of the committee today.

An advisory committee designed to review emerging risks in our financial markets is long overdue. While I am not suggesting that had this committee been set up five or 10 years ago we would not have had a financial crisis, I do believe that there were emerging risks that demanded thoughtful analysis. There was the use of new products like credit default swaps and new developments in the securitization marketplace. We also have now seen rapid advancements in technology and significant changes in market structure. We can be certain that we will continue to see innovations in the market that will require thorough review.

I think that both the CFTC and the SEC also will benefit greatly by hearing from this advisory committee together. In fact, this is the first time that the two agencies have ever shared an advisory committee. Though we have been two separate agencies since the 1930s, we both exist to protect the investing public and promote transparent, fair and orderly markets. Our two agencies’ oversight spans across the futures, securities and, hopefully shortly, the over-the-counter derivatives marketplaces. It is essential that we work cooperatively to regulate these markets. This committee can assist us in achieving this goal.

The CFTC and SEC will benefit from having outside experts thinking about emerging risks in markets and advising us on them. This morning’s meeting, and more generally the joint committee, is about looking around corners – looking into the future about where we need to take regulation.

Markets change. Market structures, practices and technology all change, and they change ever so rapidly. There is constant innovation. I hope that this committee of outside advisors can help ensure that our regulation stays abreast of those changes and that we change regulation to keep up with market changes.

Our panel is comprised of a diverse and accomplished group of individuals. I am pleased to have three former Commission chairmen. We also have three distinguished and award winning professors of economics or finance, a former director of one of the largest asset management firms in the world and the head of the independent securities regulator.

The first task that the committee will tackle is a look back at the market events of May 6. Those events had significant implications for the investing public and American businesses. It is essential that we continue our review of the contributing circumstances of the price volatility and provide recommendations to promote the integrity of our markets. More work must be done to accomplish this goal.

The committee has had an opportunity to examine the preliminary staff findings released last week. I wish to thank the staffs from the CFTC and SEC who have worked tirelessly to review the circumstances surrounding the market events of May 6 and to cooperatively put together such a report. Though there is much left to review, the report examines liquidity dislocation, linkages between the markets and the role of electronic or algorithmic trading. Today we will have staff from both the CFTC and SEC to answer questions on their findings thus far.

I am particularly interested in hearing any preliminary thoughts the panel may have to help the Commissions as we continue examining the May 6 events. I am hopeful that the committee will ultimately formulate recommendations on needed improvements to our regulatory systems.

I again thank both the CFTC and the SEC, staff and our panelists for being here today.